The Resource The effects of tax software and paid preparers on compliance costs

The effects of tax software and paid preparers on compliance costs

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The item The effects of tax software and paid preparers on compliance costs represents a specific, individual, material embodiment of a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation.

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In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self-prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, the authors simulate the effects of preparation method on time and money costs of preparing tax returns. When they correct for self-selection bias, they find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self-preparation for current self-preparers, but costs less than self-preparation for current software users

In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self-prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, the authors simulate the effects of preparation method on time and money costs of preparing tax returns. When they correct for self-selection bias, they find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self-preparation for current self-preparers, but costs less than self-preparation for current software users